Reclaiming VAT on Entertainment & Staff Expenses
Top 5 Tips: Reclaiming VAT on Entertainment & Staff Expenses
Understanding what VAT you can and can’t reclaim can save your business money — and help you stay on the right side of HMRC. Here’s your quick-reference guide to get it right.
1 Business Entertainment – No VAT Recovery
Definition: Hospitality for non-employees (e.g., clients or suppliers).
Examples:
- Client meals and drinks
- Tickets to concerts or sports events
- Corporate hospitality days
VAT Tip:
❌ You cannot reclaim VAT on these expenses — HMRC considers them a business choice, not a necessity.
2 Staff Entertainment – Full VAT Recovery
Definition: Entertainment solely for employees (excluding directors, partners, and sole traders).
Examples:
- Staff parties or BBQs
- Team-building days
- Staff award events
VAT Tip:
✅ You can reclaim full VAT — but only for employees (not directors or owners).
3 Mixed Entertainment – Partial VAT Recovery
Definition: Events where staff and clients attend together.
VAT Tip:
- ✅ Reclaim VAT on the staff portion only where acting as non-hosts (excluding directors).
- ❌ No VAT recovery on the client portion.
Example:
A dinner for 10 staff and 5 clients → You can reclaim two-thirds of the VAT.
4 Staff Expenses You Can Reclaim VAT On
- Business travel meals
- Hotel stays for business
- Office supplies and equipment
VAT Tip:
✅ Make sure the expense is for business use only.
You cannot reclaim VAT on:
- Commuting costs
- Personal items
- Anything for private benefit
5 Keep Strong Records
- Keep valid VAT invoices for all expenses
- Clearly separate staff and client costs on invoices
- Review expense policies regularly
VAT Tip:
✅ Good record-keeping makes reclaiming VAT easier and safer during inspections.
Final Reminder:
- ❌ No VAT on client entertainment
- ✅ Full VAT on employee-only events (non-directors)
- ➗ Apportion VAT for mixed events
- 📄 Keep detailed records
Need Help?
VAT rules can be tricky — mistakes could lead to costly penalties. If you would like further VAT advice, Jane Deeks will be able to assist on all VAT matters, please drop us an email – enquiries@etctax.co.uk
